"Not Necessarily Coalition, But Coalition if Necessary"

What do you think, faithful readers? Do I have a future as an Ignatieff speechwriter?

First Snapshot of Public Opinion

And it's divided, presumably along partisan lines.

That supports my view that Harper should concentrate on substance, not on how unfair it all is. We will see tonight.

What Should the Governor General Do?

That's easier.

She should give Harper any recess he wants ("proroguation" sp?).

She should not give him a new election ("dissolution". I know how to spell that one.)

What Should Harper Do?

Clearly, the NDP/Liberals are taking a perilous step. It is justified, if at all, by a sense that the Government has not taken the economic crisis seriously. The merits of taxpayer-subsidized political parties or bans on public sector strikes aside, no one thinks these are sensible responses to what ought to be the government's biggest priority. Harper should not have reappointed Flaherty as Finance Minister, but should have chosen someone broadly respected, like Prentice.

Harper's only chance now is to make his case about the appropriate response to the crisis. He needs to wonk out. If he swings public opinion in his direction, a few opposition MPs may get cold feet at the last minute, and he may survive. But even if the government goes down, it would be better to go down over something substantive than over process criticisms about legitimacy.

The heart of the analysis is traditional Keynesianism. We face a massive shock to aggregate demand. Normally, the Bank of Canada could address this shock just by reducing interest rates. That's better than dealing with it through fiscal measures because it doesn't leave a legacy of debt for future generations.

However, right now, governments can borrow unusually cheaply and monetary policy cannot do any more good. So we need to use fiscal policy. If the money is used for investments that pay off at better than the rate at which the government can borrow, then future generations will be better off as well.

The trouble is that emergency injections of public money tend to be spent badly. Here is where the Tories have an advantage. The public will be skeptical that a coalition between Dion's Liberals and the NDP will spend money well.

The agenda set out by the Coalition hardly sets those fears to rest. Do we want the CAW dictating how "strategic investments" in the automotive, manufacturing and forestry sectors are going to be spent? The Coalition program states aid will be "contingent on a plan to transform these industries and return them to profitability and sustainability." That is the most remarkable expression of hope in government planning I have seen in a long time. The League for Social Reconstruction lives.

The Coalition program is fundamentally incoherent, since it blames the federal government's deficit position on "the policy choices of the Conservative government", but also embraces "stimulus" -- which necessarily means increased deficit financing. I agree that bigger deficits are necessary, but it doesn't make sense to simultaneously criticize the Tories for too small and too large a deficit.

Increasing the supply of housing is got to be the craziest proposal for dealing with a popped housing bubble I have ever seen. The Coalition also makes as one of its dozen point a purely ideological insistence on ramming the Canadian Wheat Board and Supply Management down the throats of unwilling farmers.

Note the Preamble reference to "Canadians and Quebeckers". Presumably the plan is to develop a clean energy source from PET rolling in his grave.

Infrastructure investments are a good idea in principle, but there are practical limits to how quickly they can be "accelerated." Government tendering rules, made more complex by the Accountability Act, mean that new infrastructure takes a long time.

*The first priority should be ensuring that the provinces have enough money to maintain their spending programs. Provinces spend better than the federal government does. The last thing we want is pro-cyclic spending cuts by cash-strapped provincial governments. The Tories should propose a short-term boost in transfers to make sure this doesn't happen. If the feds have to borrow the money, that's fine, since they can borrow cheaply.

*The Tories should also propose more generous matching-fund programs for municipal and provincial infrastructure spending. That injects money without going through the sclerotic federal process. The Coalition appears to want federal control over municipal infrastructure.

*We should get money into the hands of the citizens. Make all federal tax credits refundable, and temporarily increase them.

We don't know how long the global downturn will last or how hard Canada will be hit. It makes sense to think through longer-run federal infrastructure programs, like a high-speed rail link between Toronto and Montreal. God forbid, we may have to partially nationalize the financial institutions -- the Tories have set up the legislative authority to do this.

Panicking now may reduce our scope for maneuver later.